Bad Faith Blog

Summary: Property Gusma Properties owned and insured was damaged in Hurricane Ike. When the insurer demanded an appraisal, Gusma hired an attorney to assist. Following the appraisal award, the insurer tendered a check to the attorney for the full amount, all of which the attorney retained. Gusma sued the attorney and the insurer to recover its losses. Gusma claimed it was entitled to prompt payment penalties from the insurer for issuing the check jointly payable to Gusma and its counsel. The Texas Court of Appeals affirmed the trial court’s ruling that Gusma was not entitled to penalties. The Court of Appeals held, on this issue of first impression, that an insurer does not “delay payment, within the meaning of the Prompt Payment provisions, when it tenders payment to the insured’s authorized counsel in the form of a negotiable instrument that is made jointly payable to both insured and its counsel.”

Summary: Hamilton Properties owned the Dallas Plaza Hotel, which was insured by American Insurance Company (“AIC”) when a hail storm struck Dallas in July 2009. Hail damage was covered by the policy, but losses were to be reported promptly. The District Court found that the hail loss first reported at least 19 months after the storm was prejudicially late barring coverage plus the extra-contractual damages claims. The Fifth Circuit affirmed.

Summary: Insured’s judgment creditors brought action against liability insurer to recover for unfair insurance settlement practices in connection with claim for damage to plants from salt water drawn from well drilled by insured. The trial court, after a six-day bench trial, entered judgment in favor of creditors and awarded attorney fees and expenses. Parties filed cross appeals and Appeals Court affirmed in part, reversed in part, and remanded.

Summary: Dufour, a motorcyclist insured by Dairyland Insurance Company, was seriously injured while riding his motorcycle, collected full policy limits from the tortfeasor for his bodily injuries and full property damage (PD) and underinsured (UIM) bodily injury (BI) limits from Dairyland, and then sued Dairyland for bad faith when it refused to pay him the property damage subrogation funds Dairyland collected from the tortfeasor’s insurer. The trial court granted summary judgment to Dufour on his breach of contract claim, but in favor of Dairyland on the bad faith claim finding it had not unreasonably withheld the funds from Dufour. The Court of Appeals affirmed the breach of contract award, but reversed on the bad faith claim holding Dairyland had acted in bad faith due to its made whole doctrine obligations and remanded to determine the bad faith damages. The Wisconsin Supreme Court reversed on both counts.

Summary: Insureds appealed the ruling that their insurer Automobile Club Inter-Insurance Exchange did not act in bad faith in denying their property damages claim. They argued the insurer should have accepted a late premium payment, as it had done in the past, so that the policy did not lapse. The Louisiana Court of Appeals affirmed the trial court’s ruling finding even if the insurer was equitably estopped from denying coverage it had not acted in bad faith.